Incentive payments — cash bonuses and equity awards — paid to most Wall Street financial professionals this year are expected to be flat to lower than in 2022, according to an analysis released Nov. 14 by Johnson Associates, a New York-based compensation consulting firm.
Johnson Associates attributed the muted bonus payments primarily to rising interest rates, bank failures, weak M&A activity and overall economic uncertainties.
However, within the broad scope of the financial industry, bonus payments could vary relative to specialty.
For example, investment banking equity underwriters, global retail and commercial bankers and wealth management specialists could see bonuses rise anywhere from 5% to 15%. Christopher Connors, principal at Johnson Associates, said the three areas will see higher bonuses primarily because those businesses are performing better compared to 2022.
But most other financial professionals will see thinner bonus envelopes at year-end.
Bonuses for investment banking advisory professionals can expect to decline by 15% to 25% this year from 2022, while regional commercial and retail bankers will see declines of 10% to 20%.
Incentive payments for most other Wall Street pros, including workers at hedge funds, private equity firms and asset managers, are expected to range from a decline of 10% to a modest 5% increase.
With respect to asset management, Johnson Associates stated that AUM figures are stable as rising markets partially offset outflows. However, revenue and profits are expected to fall in a shift to passive from active products.
Hedge funds are witnessing moderate inflows dominated by the largest funds. Multistrategy funds have outperformed, while macro strategies are flat following strong performance in 2022.
Within private equity, recalibration is predicted in both fundraising expectations and headcount levels, while deals and exits decline.
"With the financial markets and overall economy struggling to find footing throughout the year, most business segments remain under pressure to keep compensation costs down," said Alan Johnson, managing director and founder of Johnson Associates, in a news release issued in conjunction with the report.
The outlook for 2024 is expected to be similarly bleak, Johnson Associates added. The residual effects of higher interest rates combined with geopolitical tensions will continue to impact the financial services industry.
"Headcount and staffing models are being evaluated with consideration for lower-than-expected voluntary turnover," the news release said. "To date, broad-base salary freezes are being avoided, but smaller merit pools are being strategically allocated."
